Among all of the South East Asia states, Malaysia is one of the states that enjoy the unfastened and fast growing economic sciences. Malayan stock market besides is playing an of import function and gives part to economic growing, particularly in the development of Malaysia ‘s fiscal sector ( Baharom, Royfaizal, and Habibullah, 2008 ) .
Unfortunately, due to 1997 Asiatic Financial Crisis, Malaysia ‘s economic had faced with a serious recession due to the depreciation value of Ringgit Malaysia. This crisis had lead to the prostration of Kuala Lumpur Stock Exchange ( KLSE ) , whereby the KLSE composite index had faced the lessening of 44.8 % in 1997 ( Azmani, Habibullah, Law, & A ; Dayang, 2006 ) . The prostration of Malaysia ‘s Stock Market had given a serious downswing in fiscal sectors and leads to stock return lessening.
This crisis had shown how importance the function of stock market in Malaysia ‘s fiscal sector. Harmonizing to Nandha & A ; Hammoudeh ( 2007 ) , they mentioned that 1997 Asiatic crisis had giving a major negative impact to the Asian- Pacific contries. Therefore, this will be an attractive point in survey the alteration of stock market motion or public presentation with planetary factor such as oil monetary value ( Nandha & A ; Hammoudeh, 2007 ) .
Therefore, it is an interesting subject for research workers to analyze the motion of stock market. The motion of stock market can be increase or diminish ; investor can supervise the Composite Index of KLSE to follow the overall motion of stock market. The interesting in survey stock market is non merely about the market motion, but is to analyze what force, variables and factors that give impact to the stock market motion, or what has lead the stock market motion.
Previous survey which done by other research workers had shown a different survey perceptive and position on the stock market. In some issue, many research workers had interested with the survey on the relationship between stock monetary value and exchanges rate ( Baharom, Royfaizal, & A ; Habibullah, 2008 ) . For illustration, Bahmani & A ; Sohrabian ( 1992 ) and Nieh & A ; Lee ( 2001 ) have done a research and survey on the long tally relationship between stock market and exchange rates.
Meanwhile, the survey on the relationship between macroeconomics factor and stock market besides become an of import research in the academic field ( Adam & A ; Tweneboah, 2008 ) . Harmonizing to Adam & A ; Tweneboah ( 2008 ) , macroeconomics variable that normailly used in survey the relationship with stock monetary values have include the exchange rate, involvement rate, industrial production and rising prices.
Adam & A ; Tweneboah ( 2008 ) besides beliave that stock market is of one of the economic activities, which will be extremely influenced by the authorities pecuniary policies and macroeconomies issues. The active relationship between macroeconomics variable and stock market had encourage many research workers to analyze this subject ( Adam & A ; Tweneboah, 2008 ) .
In this survey of stock market, it will non concentrating on the relationship between macroeconomics variables and stock market. But, this survey will travel to the focal point of relastionship between trade good monetary values and stock market. Among all of the trade good, rough oil and thenar oil will be chosen as the trade good in this survey. Whereby, the monetary value of rough oil and thenar oil will be used in survey the relationship between trade good monetary value and stock market. Justification of these variables will be farther discussed in Chapter 2, Literature Review.
There are a few of definition in explicating what is trade good. Mention to Geman ( 2007 ) , the writer had mentioned that, an economic expert will specify trade good as a scarceness plus, which will give an of import consequence to the planetary and certain state development.
Commodity besides can be touchable assets and natural stuffs, which demanded by people for the intent of day-to-day use ( Frush, 2008 ) . For illustration people demand trade good for eat, for energy use and for production. Manufacturers need trade goods as natural stuffs to bring forth the concluding terminal merchandises for consumers. Examples of trade goods, gold, metal, timber, energy fuel, wheat, maize and other else. Commodity besides divided into six major trade good categories, which are metals, energy fuels, agricultural, farm animal, exotics and financials.
Frush ( 2008 ) had mentioned that all trade goods have the three features, which are “ Standardization ” , “ Tradability ” and “ Deliverability ” . The description of each feature is as below ( Frush, 2008 ) :
Standardization: Same trade good can be measureable in unit.
Tradability: Buyers and Sellers are able to merchandise trade good in a different market place.
Deliverability: Traders able to interchange with each other for the touchable or existent physicals trade good. This regulation is exclusion for fiscal trade good.
Commodity market ‘s monetary value can be fluctuating. The basic fundamental that give impact on the trade good monetary value is the supply and demand of a trade good in a market ( Somoye, Akintoye, & A ; Oseni, 2009 ) . When the demand of a trade good is higher than supply, trade good monetary value will be increase, while trade good monetary value will diminish when supply of trade good higher than demand.
Traders can merchandise or interchange trade good through in a hereafter market topographic point. Chicago Mercantile Exchange ( CME ) is one of the trade good and derived functions market in USA. It provides fiscal services, which allow populace to merchandise trade good with globally. Chicago Mercantile Exchange ( CME ) besides partnership with Bursa Malaysia Berhad ( KLSE ) in 2009, for the intent in improve trade good trading.
Among most of the energy beginnings in trade good, rough oil is one of the most of import energy ( He, Wang, & A ; Lai, 2010 ) . This is because of big demand of rough oil for transit and economic activity. Petroleum ingestion besides is the largest portion in entire energy ingestion, whereby reach 36.36 % in 2006.
Refer to the historical information, oil monetary value had reached around $ 40 per barrel in the terminal of the 1970s and get down continues to lift in 1999 and after 2001. Between 2007 and June 2008, the oil monetary value had doubled up and enter down a new high monetary value, around $ 133 per barrel. High additions in oil monetary value can because of certain issue, such as 1973 trade stoppage by OAPEC, 1978 Persian Revolution, 1980 Iraq- Iraq War and 1990 First Persian Gulf War ( Chen, 2010 ) .
Due to crude oil is playing an of import function in an economic activity, planetary economic and fiscal markets can be affected by the higher oil monetary values. This usually will take to expectation that rough oil monetary value dazes will give an consequence to the stock market.
Palm oil is “ derived from the flesh of the fruit of the oil thenar species E. Guineensis. In its virgin signifier, the oil is bright orangish-red due to the high content of provitamin A. Palm oil is Nature ‘s Gift to Malaysia, and Malaysia ‘s to the World. ” ( Malayan Palm Oil Council )
1.2 PROBLEM STATEMENT
Stock market composite index is a fiscal index, which reflects the public presentation of overall stock market. Performance of stock market can be explained as the return of stock market or monetary value motion of stock. Stock besides can be known as equity portion. Daily, stock market index can be increase or diminish, due to the overall stock monetary value motion. But, what made the stock market index travel addition or lessening?
Basically, stock monetary value influenced by the theory of supply and demand ( Somoye, Akintoye, & A ; Oseni, 2009 ) . When there are more investor bargain or demand stock, the monetary value will be addition. If people are selling the stock so the monetary value will be lessening. However, Somoye and others ( 2009 ) had mentioned that equity can be influenced by two group variables, which are macroeconomics and microeconomics. Macroeconomicss factor can be viewed as rising prices, whereby microeconomics is net incomes and dividend of equity portion ( Somoye, Akintoye, & A ; Oseni, 2009 )
Harmonizing to Gompers and others, ( 2003 ) , they had supported that information about portion ‘s dividend and net incomes are giving important impact to the stock monetary value. Negative or positive net incomes information can give a important impact on the stock monetary value ( Hartono, 2004 ) . Correlations between stock monetary value and dividend besides had supported by Docking & A ; Koch ( 2005 ) . Therefore, micro-economic factor such as portion ‘ dividend is giving impact on the stock market or monetary value motion.
In the survey of Al-Qenae and others ( 2002 ) on Kuwait Stock Exchange, they had found out that the macro- economic factors had giving negative impact on stock monetary values. In a survey on Nigerian equity market which done by Udegbunam and Eriki ( 2001 ) had give a consequence that rising prices is uncorrelated with the stock monetary value motion. However, Adam and Tweneboah ( 2008 ) have prove that rising prices give a important impact on the Ghana Stock Market motion. Same as Japan stock return besides influenced by rising prices Hamao ( 1988 ) .
In the context of Asiatic state such as India, Japan, Korea, Malaysia and Philippines, there is a survey done by Habibullah and others ( 2009 ) , which contributes to the impact of rising prices on stock market return and volatility. They found out that stock market return is hard predicted by rising prices rate, but rising prices rate give important impact to these states stock market motion and return.
By traveling through above survey, we can understand that macroeconomics and microeconomics give different impact on stock market monetary value motion. While economic sciences factors influence the motion of stock market index, does the trade good monetary value play the same function as other economic variables?
This is because Malaysia is one of the chief exporters of rough oil and thenar oil in the universe, so we need to look into whether the fluctuation of trade good monetary value give impact on Malaysia stock market. Palm oil is the chief productions in Malaysia, so there is a immense sum of trade good minutess done in Malaysia.
Therefore, we can analyze that whether trade good monetary value can go an index and signal in predict the motion of Malaysia stock market. Besides that, we will analyze the relationship or impact between trade good monetary value and Malaysia stock market motion. Finally, rough oil monetary value and palm oil monetary value will used in survey the relationship between trade good monetary value and stock market in Malaysia.
In order to analyze on the relationship between trade good monetary values and stock market, research inquiry is of import in understand the way of this survey. Research inquiry besides provide a model in complete this survey. Therefore, the research inquiries are as below:
Does trade good monetary value such as palm oil and petroleum oil influence the motion of stock market in Malaysia? Any relationship between trade good and stock market?
Between monetary value of rough oil and thenar oil, which is giving more important impact to the Malaysia Stock Market?
Aim OF STUDY
In general, the aim of this research is to analyze the relationship between trade good monetary values and stock market. The specific aim of this survey is as below:
To look into the relationship between petroleum oil monetary value and Malaysia Stock Market.
To look into the relationship between palm oil monetary value and Malaysia Stock Market.
To look into the important impact between monetary value of rough oil and thenar oil on Malaysia Stock Market.
Scope OF STUDY
This survey will be focus on the Malaysia Stock Market, which besides known as Kuala Lumpur Stock Exchange. Malaysia has been chosen in this survey because it is one of the states in South East Asia, which enjoy the unfastened and fast growing economic sciences ( Baharom, Royfaizal, & A ; Habibullah, 2008 ) . In a same clip Crude oil and thenar oil have been chosen in this survey because Malaysia is the net exporter of rough oil and besides the chief production of palm oil. So, this survey besides covers the impact of rough oil and thenar oil ‘s monetary value on Malaysia, which as the exportation and manufacturer state.
STRUCTURE OF STUDY
In the beginning of this chapter, this survey has begun with the overview of Malaysia Stock Market, and so the brief explain on trade good. Further treatment besides had done on the petroleum oil and thenar oil.
Chapter 2 will be focus on the literature reappraisal, which will discourse and made justification on the relationship between trade goods and stock market. Discussion done based on the old survey and literature.
Chapter 3 will be the methodological analysis in discuss the method in investigate or analyze the relationship between trade good monetary value and stock market, while Chapter 4 will be the consequence of this survey.
SIGNIFICANT OF STUDY
In Malaysia, the most common trade good that available in Bursa Malaysia is rough palm oil. Palm oil industries besides play as the anchor and give immense part to Malaysia ‘s economic sciences. In fact, there are 17.7 million dozenss of palm oil had produced by Malaysia in 2008. Whereby, this had shown that Malaysia is the 2nd largest of palm oil manufacturer and exporter.
Due to the fact that Malaysia is one of the largest manufacturers and exporter in the universe, besides there is few palm oil corporations are playing of import function in Malaysia Stock Markets. So, the fluctuations of the palm oil monetary values can give impact to Malaysia, particularly to handle oil manufacturer and corporation. Therefore, does the fluctuations of palm oil ‘s monetary value give impact to the Bursa Malaysia Stock Market ‘ public presentation? Does any relationship can be proved between Palm Oil ‘s ( Commodity ) Price and Bursa Malaysia?
2.1 COMMODITY MARKET
Since 1994, big demand in trade good had given an advantage for several developing states.
Same state of affairs was traveling to Malaysia in 1994. Malaysia had been the biggest victor in the dealing of dollar footings, which had earn about $ 5.2 billion from the trade good market ( Buckley, 1996 ) . Whereby, the trade goods that taking in Malaysia are palm oil and gum elastic.